Across the board earnings reports are good

Happy Sunday!

Though only 11% of major companies have reported their second quarter results, 71% of those reporting have beaten analyst expectations. That 71% compares to the average number of companies beating analyst expectations of 61%. Yes, its true that expectations are very low right now. However, these results are still a good sign that the recession is stalling.

Earnings season typically stretches out for about 7 weeks after the end of the quarter. Obviously there could still be some big surprises from some major firms that will wither investor confidence. However, many bellwethers for industries hyper-scrutinized have already reported. In technology Intel, Dell, Google and IBM have all reported. In banking, Goldman Sachs, Citigroup and Bank of America have all reported. In the industrial space Alcoa and General Electric have reported. These firms make up a broad cross-section of U.S. business so the firms still left to report are not likely to contain any super-surprises. Right now everyone wants an insight into the overall economy. I am guessing that any surprises that occur will be firm-specific rather than economy-specific.

Not surprisingly the Dow Jones Industrial Average was up 7.3% last week, recovering almost all of the losses from June. While this is encouraging, what ultimately drives the economy and the financial markets is something not easily tracked: mood. And that’s where I am concerned. A malaise has settled into the U.S. psyche. It’s as if people have allowed themselves to feel beaten down and they just can’t seem to jump start any positive-feelings about their futures. I am closely paying attention to any anecdotal information and stories that communicate the mood of our fellow citizens. In the meantime, I’m going to keep smiling!

Jason